Outlook for Offshore Wind: Dark and Stormy

Source: By MATTHEW L. WALD, New York Times • Posted: Wednesday, December 5, 2012

A new worldwide survey of offshore wind installations takes a look at why it might be slow going in the United States, which still doesn’t have any.

Navigant Consulting, reviewing conditions at the end of last year, found that building a wind machine offshore in Europe cost about 4 million euros (around $5.1 million) per megawatt of capacity. By comparison, wind turbines built onshore in the United States (the only point of comparison for now) cost about $2 million per megawatt.

Building offshore is not all downside; for one thing, there is more wind, so identical machines onshore and at sea will produce wildly different amounts of electricity. And winds offshore tend to blow around the clock, delivering some energy during daylight, when electricity sells for a higher price in the wholesale markets. On land, the wind blows mostly at night, producing electricity at an hour when the market for electricity is depressed.

The Navigant study found that costs in Europe were increasing and are now 50 to 100 percent higher than they were when the first large-scale projects were built.

“The main reason is they are moving further offshore into deeper waters,” said Bruce Hamilton, a wind expert with Navigant. “The easy sites are getting used up.” But the wind is better farther offshore, he said, so the electricity may not cost more over all even if the machine does..

Still, the numbers indicate that such electricity would not be competitive in America. According to Navigant, operation and maintenance – separate from the cost of building the machines – costs about 39 euros, or about $50, per megawatt-hour. That is almost as high as the average wholesale price of a megawatt-hour in New York State — $59 last year.

Wind installations in the United States benefit from a production tax credit and other tax breaks, but “it’s just not competitive,” Mr. Hamilton said. “People won’t do it unless they’re forced to.”

But costs could come down, he said.

Navigant said two projects could go into service off the East Coast in 2014: Cape Wind, near Cape Cod, Mass., and Fishermen’s Energy, off the New Jersey coast. Each benefits from a law passed by a state legislature.

The firm is tracking three other proposals along the East Coast, three off the Texas coast and one on the Ohio shore of Lake Erie for which site surveys have already been conducted or leases or power purchase agreements negotiated.